He rose from a Brooklyn housing project to Harvard, and then from metal sales to the highest perch on Wall Street. Now Lloyd Blankfein is winding down his 12-year tenure as Goldman Sachs’ chief executive, the longest run atop the firm in five decades.
Blankfein’s career as Goldman’s leader has included notable peaks — Warren Buffett once said of potential replacements, “If Lloyd had a twin brother, I would vote for him” — but also difficult depths.
DealBook takes a look at some of its most notable moments.
— THE HIGHS
Becoming CEO in the first place. Few could have predicted where Blankfein would end up when he left a job as a corporate lawyer to become a gold bullion salesman at the commodities trader J.Aron. By the time he joined the firm, Goldman had acquired it, and Blankfein climbed the ranks, eventually leading Goldman’s hugely profitable trading operations and then succeeding Hank Paulson as chairman and chief executive.
Leading Goldman through the financial crisis. Less than two years into his tenure leading Goldman, Blankfein faced a growing economic storm, as dubious mortgage investments beloved by Wall Street began to melt down. Under his watch, Goldman pared its risk earlier than its rivals did, leaving it better prepared to weather the crisis. He also helped secure a crucial $5 billion lifeline from Buffett’s Berkshire Hathaway that helped reassure other investors.
Goldman’s advisory business performance. During Blankfein’s time, Goldman’s investment banking division remained the envy of Wall Street. The business regularly leads rankings of advisers on mergers and on the sale of equity and debt. (Not all of the firm’s units have fared as well. See below.)
— THE LOWS
Abacus 2007-AC1. That seemingly meaningless name represented one of the biggest headaches in Goldman’s history. The firm created the investment vehicle to help a hedge fund client bet against the housing market in 2007. The Securities and Exchange Commission sued Goldman in 2010 for securities fraud. Goldman eventually agreed to pay $550 million to settle the claims, but not before Blankfein’s famously testy appearance before the Senate. It was a time of public animosity toward Wall Street, and Goldman in particular. (The firm garnered the nickname “vampire squid” just a year earlier.) For a while, Blankfein became a lightning rod; his reputation for regrettable jokes, like saying Goldman was doing “God’s work,” didn’t help.
Goldman’s recent performance. Goldman was slow to change its business model and diversify in the wake of the financial crisis. The firm continued to bet on trading, historically its biggest profit driver and the unit Blankfein once led. But the division stumbled badly in recent years, thanks to low volatility and some ill-placed trades. Meanwhile, Goldman’s archrival, Morgan Stanley, was rewarded for diversifying from high-risk, high-reward trading into the more boring but more reliable business of wealth management. Shares of Morgan Stanley have gained 22 percent during the past three years, while Goldman’s stock is up just 9 percent.